Bank's 2021 Performance and Crypto Activities
MEMORANDUM TO: Correspondence File
FROM:
XXXXX
Case Manager
SUBJECT:
XXXXX
Interim Bank Contact
I discussed the bank’s condition with President XXXXX and CFO XXXXX on February 10, 2022. SACM XXXXX also participated on the call. The bank was most recently examined by the FDIC on July 26, 2021, and was rated XXXXX.
President XXXXX advised that 2021 was a very good year for the bank despite the ongoing pandemic. The bank earned XXXXX, which was nearly XXXXX over budget. The Sub S ROAA equaled XXXXX, which compares to XXXXX in 2020. Contributing to the strong earnings performance was XXXXX in PPP fee income, strong income from the bank’s mortgage operations, and low cost deposits. For 2022, the bank has conservatively budgeted net income of XXXXX. The budget projects XXXXX rate hikes, plus XXXXX monthly in PLLL. Through the first month of the year, the bank was XXXXX budget.
Asset quality is as clean as can be according to President XXXXX. The ACI ratio at the examination was XXXXX and it remains XXXXX. The lending focus remains the same, which is CRE, C&I, followed by 1-4 family. Loan volume XXXXX about XXXXX in 2021 as the bank has some XXXXX. President XXXXX stated that loan growth projections for 2022 are in the XXXXX range (XXXXX). He noted that this will be a challenge.
There have been no changes in senior management or the board since the prior examination. Additionally, no major products or initiatives are planned. Following this conversation, we discussed the BSA/AML recommendations that were provided during the examination. Specifically, there were various recommendations involving the bank’s XXXXX asset customers. CFO XXXXX stated that the bank reviewed all the recommendations and believes most of the recommendations were really good. The BSA/AML Policy and risk assessment were subsequently revised and approved by the Board in early February 2022. She noted that the XXXXX customers have been very transparent with the bank, and XXXXX in particular has taken a number of positive steps, including the hiring of a new chief BSA risk officer. The crux of our conversation involved the need for the bank to justify the volume of cash going through the institution and be able to access and review the underlying data of the XXXXX customers. CFO XXXXX stated that she believes we may be asking for more than what is required of the bank, but SACM XXXXX reiterated the importance of knowing and understanding the cash activity involving these XXXXX customers. He stated that we are not asking the bank to exit these customers.
relationships, just to better understand their cash activity. The Customer Due Diligence Rule and Suspicious Activity Rule make up the legal basis for the recommendation. Under a risk focused approach, the bank is required to do more on higher risk accounts. Various options were discussed during the call regarding how to do this, including reviewing CTRs that are being filed by the digital asset customers, or reviewing any underlying concentration reports prepared and maintained by the XXXXX customers. CFO XXXXX committed to take further action to better understand the underlying cash transactions and determine if the digital asset customers are appropriately following their policies.
The Leverage ratio equaled XXXXX at December 31, 2021. The September 30, 2021, FDIC liquidity worksheet reveals a XXXXX Overall Liquidity Assessment and a XXXXX liquidity ratio. No information was gleaned from the phone call, or from the UBPR that would necessitate the examination frequency be adjusted. The next examination will be conducted by the XXXXX.